May 4, 2010 -- Those little fees sure do add up. Airlines across the county have been changing customers extra for all sorts of services, from checking bags to changing reservations, and it's paying off handsomely for them.
Last year, U.S. airlines took in more than $7.8 billion in fees from passengers, according to the Department of Transportation's Bureau of Transportation Statistics. And those fees are rising quickly. In the last three months of 2009, the airlines charged passengers $1.9 billion in extra fees, up a whopping 18.3 percent from the same period the prior year.
And there are signs that things are only going to get worse for passengers.
Delta, followed by Continental, then United, then US Airways and finally American, all raised their checked-bag fees at the start of 2010. And if that wasn't bad enough, Spirit announced last month that it will soon charge up to $45 to place your carry-on bag in the overhead bin.
"You can easily spend more on fees these days than on your fare," said George Hobica, president of airfarewatchdog.com. "Worst case scenario: an unaccompanied minor traveling with his pet cat and checking two pieces of luggage each weighing over 50 pounds."
From October to December, the airlines collected $736 million in baggage fees, $564 million from reservation change fees and $611 million from other ancillary fees, such as pet transportation fees and frequent flier award program mileage sales.
Those figures don't include the myriad other ways -- besides the actual cost of your ticket -- that the airlines make money off passengers. Those include charging for seat assignments and the on-board sales of food, drinks, pillows, blankets and even TV shows and movies.
The airlines find these fees necessary for their survival. Even with all those add-ons, most of the legacy airlines still lost money while the so-called discount or low-cost airlines just eked out a profit.
"Airlines have become addicted to fees in the same way that state government has become addicted to cigarette taxes," Hobica said. "I don't see them going away anytime soon, if ever. They spell the difference between insolvency (as in ceasing to fly) and merely losing billions of dollars. Perhaps with fees plus consolidation, the U.S. airline industry will eke out a small profit."
Following Airline Fees
Keeping track of fees can be a nightmare for customers. When searching on the Internet for tickets, most sites just compare the base price of the fare. It isn't until passengers check in for their flights that they are hit with all the additional charges.
But some airlines are worse than others.
Spirit Airlines -- which is installing seats that don't recline on its new jets -- leads the pack with the greatest reliance on fees. Spirit took in 21 percent of its revenue from fees at the end of 2009, according to the Department of Transportation.
That's way above the industry average of 6.5 percent of all revenues coming from fees. Overall, 32 airlines reported charging some type of fee but only seven of them took in more than the 6.5-percent average.
Still, Hobica for one says that passengers can still save on Spirit.
"Even with the fees, if you get one of their $9 fares minus a $24-off promo code, they are a discount airline," he said. "And their Big Front seat (sort of business class) is a real bargain. Whether they're a good airline or not is up to question."
Spirit was followed in the fees-as-percent-of-revenues list by AirTran (10.2 percent), Delta (9.5 percent), Allegiant (8.8 percent), US Airways (8.6 percent), Virgin America (8.2 percent) and Frontier (6.6 percent).
Airlines and Their Added Fees
Northwest Airlines, which is now part of Delta, came in at 5.9 percent. Southwest and JetBlue round out the top ten, with 5.8 percent of revenues coming from fees.
United, Continental and American, which all took in millions in fees but rely on long-haul international ticket sales for the greatest profit margins, did not make the top-ten list.
Southwest doesn't charge for checked bags, phone reservation or changing tickets but still took in millions of dollars from assorted fees -- including the $75 it charges each way to bring your pet onboard.
"Southwest Airlines has been smart enough to not pit themselves against their own customers," said Jeff Pecor, of travel site Yapta.com. "In fact, they're using the 'me versus the airline' issue to its competitive advantage by marketing 'no baggage fees' quite heavily. The airline has managed to find ancillary revenue in areas other than baggage fees, so it begs to be asked: Why can't other low-cost carriers?"